Were Hedge Funds Right About Sea Limited (SE)?

While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March, 2020 and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Sea Limited (NYSE:SE).

Sea Limited (NYSE:SE) has experienced an increase in enthusiasm from smart money recently. Sea Limited (NYSE:SE) was in 104 hedge funds’ portfolios at the end of June. The all time high for this statistic is 115. Our calculations also showed that SE ranked 18th among the 30 most popular stocks among hedge funds (click for Q2 rankings).

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. Recently we came across a high growth stock that has tons of hidden assets and is trading at an extremely cheap valuation. We go through lists like the 10 best growth stocks to buy to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now we’re going to view the new hedge fund action regarding Sea Limited (NYSE:SE).

Do Hedge Funds Think SE Is A Good Stock To Buy Now?

At second quarter’s end, a total of 104 of the hedge funds tracked by Insider Monkey were long this stock, a change of 6% from one quarter earlier. On the other hand, there were a total of 82 hedge funds with a bullish position in SE a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Sea Limited (NYSE:SE) was held by Tiger Global Management LLC, which reported holding $2786.8 million worth of stock at the end of June. It was followed by Kora Management with a $956.7 million position. Other investors bullish on the company included ARK Investment Management, Coatue Management, and SCGE Management. In terms of the portfolio weights assigned to each position Kora Management allocated the biggest weight to Sea Limited (NYSE:SE), around 94.54% of its 13F portfolio. ShawSpring Partners is also relatively very bullish on the stock, dishing out 33.07 percent of its 13F equity portfolio to SE.

As industrywide interest jumped, key hedge funds have been driving this bullishness. LMR Partners, managed by Ben Levine, Andrew Manuel and Stefan Renold, initiated the largest position in Sea Limited (NYSE:SE). LMR Partners had $209.5 million invested in the company at the end of the quarter. Gabriel Plotkin’s Melvin Capital Management also initiated a $151 million position during the quarter. The other funds with brand new SE positions are James Dinan’s York Capital Management, Nancy Zevenbergen’s Zevenbergen Capital Investments, and Lee Ainslie’s Maverick Capital.

Let’s now review hedge fund activity in other stocks similar to Sea Limited (NYSE:SE). These stocks are NextEra Energy, Inc. (NYSE:NEE), Anheuser-Busch InBev SA/NV (NYSE:BUD), The Boeing Company (NYSE:BA), Amgen, Inc. (NASDAQ:AMGN), The Charles Schwab Corporation (NYSE:SCHW), Lowe’s Companies, Inc. (NYSE:LOW), and Rio Tinto Group (NYSE:RIO). This group of stocks’ market caps resemble SE’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 49.3 hedge funds with bullish positions and the average amount invested in these stocks was $2597 million. That figure was $12210 million in SE’s case. The Charles Schwab Corporation (NYSE:SCHW) is the most popular stock in this table. On the other hand Anheuser-Busch InBev SA/NV (NYSE:BUD) is the least popular one with only 18 bullish hedge fund positions. Compared to these stocks Sea Limited (NYSE:SE) is more popular among hedge funds. Our overall hedge fund sentiment score for SE is 88.6. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks returned 26.3% in 2021 through October 29th but still managed to beat the market by 2.3 percentage points. Hedge funds were also right about betting on SE as the stock returned 25.1% since the end of June (through 10/29) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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Disclosure: None. This article was originally published at Insider Monkey.